Exciting things are happening in Japan in the regenerative medicine space. As people who work in the industry may be aware, in 2014 Japan modified the regulations pertaining to regenerative medicine products through the adoption of the “Pharmaceutical and Medical Device Act” or “PMD Act”. The PMD Act defines “regenerative medicine” to include cell therapy and gene therapy, and importantly offers an opportunity for companies to apply for “conditional approval” of such therapies in Japan based on safety and early efficacy (Phase 2) results. The PMDA has also increased its staff for regenerative medicine-specific consultations. Both domestic and foreign companies developing cell-based products are taking advantage of the new regulations, and the number of regenerative medicine specific consultations (note: CMC, non-clinical and clinical consultations required) has increased from a total of 19 in 2013, to 40 through 2015. In 2015, two regenerative medicine products were approved in Japan under the new regulations: Temcell®HS Injection (allogenic stem cell therapy for graft-versus-host disease) and Heart Sheet® (autologous skeletal myoblast sheets for severe chronic heart failure). Importantly, both products were included on the national healthcare insurance (NHI) system, meaning the majority of the cost of both products will be reimbursed by the government.

Up until recently, the majority of activity in the regenerative medicine space with regards to development, licensing or M&A has been made by smaller/emerging or non-traditional healthcare companies (e.g. Fuji Film, Healios, JCR Pharmaceuticals). The majority of large Japanese pharmaceutical companies have been watching the development of the regenerative medicine environment from the sidelines with interest but little action.

That is beginning to change. Over the past 12 months, companies such as Astellas, Takeda, Daiichi Sankyo and Mitsubishi Tanabe have made major moves in the regenerative medicine space through executing significant transactions. Examples of such recent deals include:

•  Astellas acquired Ocata Therapeutics for $379 million; Ocata is developing stem cell therapies for ophthalmology indications (Nov 2015)
• Daiichi Sankyo paid $18 million in upfront licensing fees, with additional future milestone payments, to Cell Therapy to acquire Japan rights to Heartcel(r), an allogenic stem cell treatment for heart failure (May 2016)
• Mitsubishi Tanabe paid $24 million in upfront licensing fees, and additional milestone and other payments up to $410 million, to Kolon Life Science of Korea to acquire Japan rights to Invossa®, a cell-mediated gene therapy for osteoarthritis

In Japan, the Locust Walk team meets regularly with business development executives at mid-size and large Japanese pharmaceutical companies. Over the past few months, we have seen a significant increase in interest in acquiring rights in Japan to regenerative medicine compounds.

We fully expect the deal volume in this space to continue to grow, and believe western biopharma companies developing cell-based or gene therapies should consider exploring development and/or partnering opportunities in Japan.

At Locust Walk, we are pleased to support a number of clients with the Japan partnering of their regenerative medicine products. Please contact us if you would like to discuss how we can support your company: steve@locustwalk.com